American dream lost

Some local homeowners behind on their mortgage payments aren't selling their homes. The banks are doing it for them through foreclosure.

Deborah Borns of Coldwell Banker Lakeshore classifies the real estate market in general as "frustrating."

"But the market has always been one of ups and downs. I've been in this business for 32 years so I've been through this before," Borns said, adding she feels the local market is not as bad as the rest of the state. "But I think this present economy will drive a lot of the younger realtors out of the business, and that's a real shame."

She observed there is not much local experience of high highs and low lows in real estate sales.

"I'd call the market in Mercer and Auglaize counties stable," Borns said showing graphs from a multiple listing service. "Certainly, locally we have an oversupply of houses on the market, but it's not as dramatic as in other areas of the state and country. A look at what's happening in California, Florida and Arizona tells you (mortgage banking) got greedy."

The information showed Mercer County with 280 property sales in 2007, down from 308 in 2006. Sale prices in 2007 were still more than 90 percent of list price.

In Auglaize County 2007 property sales totaled 332, down from 367 in 2006; and sale price versus list price was 94.12 percent.

Sgt. Lori Knapke of the Mercer County Sheriff's Department handles arrangements for sheriff's sales, another term for bank foreclosures. Her records show 64 foreclosures in 2006 and 105 last year, a more than 60 percent increase.

"Yes, the numbers are going up. So far this year I've had 35 orders of sale. This time last year I had 25," she told the newspaper last week.

According to a report from "Policy Matters Ohio" compiled a year ago, Mercer County already was in escalating foreclosures, up 45 percent in 2006 over the year before.

One reason Borns credits the local market for being more stable than most is that the population tends to be very conservative. She explained that it's not unusual for people who can afford a $200,000 home to buy a $100,000 home. "That's just the thinking in this area and there's nothing wrong with it," she added.

Phil Schumann, vice president of lending at Mercer Savings Bank in Celina, agrees.

"Things don't hit us (locally) as quick or as severe ... We tend to be more conservative. We will not put people in a house just to get them in a house. The goal (of all lending institutions), after all, is to get the loan paid back," he said. "Some banks may require no more than 45 percent of a borrower's income paid out in debt; but we may say we don't want their debt payments to be more than 36 percent of their income."

He said one type loan that was a culprit in the national foreclosure fiasco is called a low- or no-docs loan. That's where the lender qualifies the borrower and fits him into a loan, but the lender neglects to verify the application information. That practice gave birth to a big problem down the road for the homeowner, the bank and ultimately the community.

Discretionary spending comes to a crashing halt when all the household money is going for gasoline, home heating, food, and, at least at first, some kind of payment on the mortgage. And so the cycle goes.

It isn't long before the wolf is not only at the door but inside the house and watching TV in the basement.

Steve Mackenbach of Coldwell Banker Plus One Professionals in St. Marys has been in the area real estate market for more than two decades.

"People are simply buying more than they can afford and the system is allowing them to be overextended ... They buy a home and then buy a lot of stuff they may not be able to afford to go in it. Then they lose their jobs and just can't handle the payments anymore," he said.

Sgt. Knapke's current sheriff's sale list shows a broad value scale of homes in foreclosure, from $575,000, to $220,000 to $140,000 to $50,000. "There's just no way to say there's an average price. I had one a couple months ago listed at $8,000," she said.

(The average price of a home in Mercer County in 2007 was $125,283. In Auglaize it was $118,897.)

Banks start the foreclosure process rolling by securing a sale order from Mercer County Common Pleas Court. The delinquency cutoff is at the bank's discretion, usually between four and six months, but sometimes it's more than a year.

Knapke takes care of having the property appraised and advertised. At least two-thirds of the appraised value is required for purchase. "I'd say 90 percent of the houses are purchased by the bank itself," she said.

Then there is a confirmation hearing in court and the distribution of costs are deducted. Whatever is left goes to the mortgage or bank. If a third party purchased the property, they usually get possession within the next six weeks following confirmation.

"It's still the homeowner's property up to two days before confirmation, and they can still stop the foreclosure. Filing bankruptcy, for example, will stop it," Knapke said.

In summary, Schumann observed local delinquency on mortgages is up and house values are down.

"But those figures are measured against our local norms and they're not measured as big losses. And, certainly they're not near the national averages," the banker said.